European, US stocks ease after mixed bank earnings

LONDON — European and U.S. stock markets drifted down Thursday after mixed bank earnings reined in the optimism that sent many of the world’s major indexes to year highs the day before.

In Europe, the FTSE 100 index of leading British shares was down 18.60 points, or 0.4 percent, at 5,237.50, while Germany’s DAX fell 17.19 points, or 0.3 percent, to 5,836.95. France’s CAC-40 was down 7.71 points, or 0.2 percent, at 3,874.96.

On Wall Street, the Dow Jones industrial average was 19.27 points, or 0.2 percent, down at 9,996.59 in New York morning trading while the broader Standard & Poor’s 500 index fell 3.28 points, or 0.3 percent, at 1,088.74.

All five indexes had closed Wednesday at their highest levels for over a year after strong earnings from the likes of JP Morgan Chase & Co. and Intel Corp.

Thursday’s raft of earnings were relatively mixed. Though Goldman Sachs’ earnings more than tripled in the wake of a strong performance from the bank’s trading operations, its rival Citigroup Inc. barely booked a profit after accounting for more bad loans.

Despite their contrasting fortunes, both stock prices fell. Analysts said the strong start to the third-quarter earnings results season had perhaps ratcheted up expectations a bit too much.

“JP Morgan and Intel have raised the bar, and though Goldman’s results were certainly not negative, there’s still a long way to go in terms of the third quarter reporting season,” said Richard Hunter, equity strategist at Hargreaves Lansdown stockbrokers in London.

There’s also talk that the markets may be getting ahead of themselves in anticipating a speedy and significant global economic recovery, especially after Finnish mobile phone maker Nokia Corp. reported a loss of €559 million ($832 million) in the third quarter, taking hits from a 20 percent drop in sales and a one-time charge for the fallen value of its network equipment unit. Nokia shares were down 10 percent

Howard Wheeldon, senior strategist at BGC Partners, said investors across all markets, whether stocks or commodities or bonds, have to be careful that they don’t overreact to the better than expected earnings.

“We must take care now not to ignore the likelihood that what we are seeing unfold before our eyes now is nothing short of a bubble and one that at some point will surely burst,” he said.

Earlier in Asia, stocks had rallied hard, as investors caught up with the gains posted in Europe and the U.S. Wednesday.

In Japan, the Nikkei 225 stock average gained 178.44 points, or 1.8 percent, to 10,238.65, and Hong Kong’s benchmark added 112.60, or 0.5 percent, to 21,999.08, hitting a new high for the year during trade.

South Korea’s Kospi edged up 0.6 percent, while markets in mainland China and Taiwan also were higher.

Australia’s stock market and currency made further gains amid rising confidence about its resource-driven economy, with the benchmark stock index up 0.6 percent. On Thursday, the country’s central bank chief said the worst of the global financial crisis is probably over for Australia and suggested more rises in interest rates to contain the threat of inflation.

Thailand bucked Asia’s advance as worries about the health of the country’s 81-year-old king sent the stock market plunging over 8 percent at one point.

Meanwhile, the dollar pared early losses after hitting another 14-month low against the euro.

The dollar was up 1.4 percent at 90.58 yen while the euro fell 0.3 percent at $1.4896, having earlier hit $1.4967, its highest level since August 2008.

Oil prices rose towards year highs on growing investor optimism about an economic recovery. Benchmark crude for November delivery was up 32 cents to $75.50 a barrel.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.